Stock-Based Compensation

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:



	Three Months Ended				Nine Months Ended
(In thousands)	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Cost of products sold	$	219	$	154	$	652	$	562
Research and development	926		980		2,970		4,129
Selling, general, and administrative	1,563		1,380		6,286		4,595
Total stock-based compensation	$	2,708	$	2,514	$	9,908	$	9,286

The stock-based compensation expense included in Selling, general, and administrative expense for the first nine months of fiscal 2018 includes approximately $1.4 million of additional one-time expense for acceleration of stock compensation under the CEO separation agreement executed with our former CEO during the first quarter of fiscal 2018.

Performance-Based Stock Compensation

In fiscal years 2015 through 2017, we granted stock options and RSUs with a market condition to certain executives. The options have a two year vesting period and can vest between 0% and 200% of the target amount, based on the Company's relative Total Shareholder Return ("TSR") when compared to the TSR of a component of companies in the PHLX Semiconductor Sector Index over a two year period. Under the terms of the grants, executives will receive the target amount if the Company’s TSR relative to that of the Index achieves or exceeds the 50^th percentile. Executives may receive 200% if the Company’s TSR exceeds the 75^th percentile. No vesting occurs if the Company’s TSR does not exceed the 25^th percentile. TSR is a measure of stock price appreciation plus dividends paid, if any, in the performance period. The fair values of the options and RSUs were determined and fixed on the date of grant using a lattice-based option-pricing valuation model incorporating a Monte-Carlo simulation and a consideration of the likelihood that we would achieve the market condition.

In September 2018, we granted inducement awards outside of, but subject to the terms and conditions of the Company’s stockholder approved equity compensation plan to our incoming President and Chief Executive Officer. The inducement awards included market and performance based restricted stock that vest and become payable upon satisfaction of certain market and performance conditions. The market and performance conditions include TSR and Adjusted EBITDA targets, respectively. The TSR based awards vest and become payable over a three-year period based on the Company’s TSR relative to the PHLX Semiconductor Sector Index, with 100% of the units vesting at the 50th percentile and a multiplier to 250% of the units vesting at the 75th percentile achievement, zero vesting if relative TSR is below the 25th percentile, and vesting scaling linearly for achievement between the 25th and 75th percentile. The Adjusted EBITDA based awards will vest and become payable based upon the Company’s generating specified “adjusted” EBITDA levels on a trailing four quarter basis in any two consecutive trailing four-quarter periods.

The following table summarizes the activity for our stock options and RSUs with a performance condition during the first nine months of fiscal 2018:



(Shares in thousands)	Unvested		Vested		Total
Balance, December 30, 2017	707		83		790
Granted	573		—		573
Vested	(31	)	31		—
Exercised	—		(78	)	(78	)
Canceled	(429	)	(10	)	(439	)
Balance, September 29, 2018	820		26		846

We incurred stock compensation expense related to these market condition awards of approximately $0.1 million and $0.6 million in the third quarter and first nine months, respectively, of fiscal 2018 and of approximately $0.1 million and $0.4 million in the third quarter and first nine months, respectively, of fiscal 2017, which is recorded as a component of total stock-based compensation expense.